Zeus Capital Q&A with Mike Allen: Gyg PLC (LON:GYG)

Global Yachting Group

Gyg PLC (LON:GYG) is the topic of conversation when Zeus Capital’s Head of Research Mike Allen caught up with DirectorsTalk for an exclusive interview


Q1: Global Yachting Group (GYG) released its year-end results yesterday, what kind of flavour did you gain from the report?

A1: The results that they delivered, full year to December, very respectable growth during 2017 in what proved to be a very productive year for the group as it successfully made its transition onto the AIM market.

Revenues were up 14.7% year-on-year, EBITDA went from €6.7 million to €7.2 million, an 8% increase, and we saw a similar increase in adjusted earnings per share as well. Net debt fell from €10.4 to €6.7 million albeit largely the drop there was due to the funds from the IPO.

Overall, very respectable mainly organic growth that was delivered in this year in what proved to be a busy year for them.


Q2: What can you tell us about the market dynamics?

A2: The market dynamics are very positive indeed really, the super yacht new build and refit painting business continues to grow at around 6%, the refit market within that is very strong as well. I think the dynamics behind that, we expect the number of billionaires globally to grow by a CAGR of about 9% to 2020 and that correlates very strongly with the number of super yachts in existence. The size of the super yachts continues to grow as we expected during the IPO as well and Gyg typically get paid on a square foot basis.

So, I think the dynamics in terms of growth of the end customer, the number of yachts continue to be positive and we’d expect that to filter through into new build and refit markets.


Q3: Has this affected your forecasts in any way?

A3: No, we’ve maintained our forecasts for 2018 for now, they’ve seen some growth in the order book and we do believe the business is well positioned in the industry as well as a leading player and global player in this niche market, but we’ve kept the forecasts unchanged for now.


Q4: In terms of company valuation, what are the key things that we should be looking at?

A4: GYG shares have de-rated slightly of late, I think if you look at the valuation on December 2018 basis, it’s trading on a PE of just below 10 times, EV/EBITDA of 6 times and there’s a dividend yield on offer at about 6%. The free cash flow dynamics of the business are very positive, and we estimate a yield of around 10% there and it’s an asset light business as well and the returns on capital are approaching 30% so to my mind, it’s a very good asset light niche business.

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